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http://ssrn.com/abstract=557922
 
 

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The Effect of Automobile Insurance and Accident Liability Laws on Traffic Fatalities


Alma Cohen


Tel Aviv University - Eitan Berglas School of Economics; Harvard Law School; National Bureau of Economic Research (NBER)

Rajeev H. Dehejia


New York University (NYU) - Robert F. Wagner Graduate School of Public Service; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA); CESifo


The Journal of Law and Economics, Vol. 47, pp. 357-393, 2004

Abstract:     
This paper investigates the incentive effects of automobile insurance, compulsory insurance laws, and no-fault liability laws on driver behavior and traffic fatalities. We analyze a panel of 50 U.S. states and the District of Columbia from 1970-1998, a period in which many states adopted compulsory insurance regulations and/or no-fault laws. Using an instrumental variables approach, we find evidence that automobile insurance has moral hazard costs, leading to an increase in traffic fatalities. We also find that reductions in accident liability produced by no-fault liability laws have led to an increase in traffic fatalities (estimated to be on the order of 6%). Overall, our results indicate that, whatever other benefits they might produce, increases in the incidence of automobile insurance and moves to no-fault liability systems have significant negative effects on traffic fatalities.

Number of Pages in PDF File: 38

Keywords: No-fault laws, compulsory insurance, moral hazard

JEL Classification: G22, J28, K13

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Date posted: September 23, 2004  

Suggested Citation

Cohen, Alma and Dehejia, Rajeev H., The Effect of Automobile Insurance and Accident Liability Laws on Traffic Fatalities. The Journal of Law and Economics, Vol. 47, pp. 357-393, 2004. Available at SSRN: http://ssrn.com/abstract=557922 or http://dx.doi.org/10.2139/ssrn.557922

Contact Information

Alma Cohen (Contact Author)
Tel Aviv University - Eitan Berglas School of Economics ( email )
Ramat Aviv, Tel Aviv, 69978
Israel
Harvard Law School ( email )
Cambridge, MA 02138
United States
(617) 496-4099 (Phone)
(617) 812-0554 (Fax)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Rajeev H. Dehejia
New York University (NYU) - Robert F. Wagner Graduate School of Public Service ( email )
The Puck Building
295 Lafayette Street, Second Floor
New York, NY 10012
United States

National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Institute for the Study of Labor (IZA) ( email )
P.O. Box 7240
Bonn, D-53072
Germany

CESifo ( email )
Poschinger Str. 5
Munich, DE-81679
Germany

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